4.85% RBA rate: Australian Dollar weakens against Japanese Yen after fifth hike this year

110.20 in focus as AUD/JPY slips towards the level during Tuesday’s Asian session.
25 bps increase takes the RBA interest rate to 4.85% at Tuesday’s November policy meeting.
The risk of currency intervention by Japanese authorities keeps traders on high alert.

110.20 is the approximate level AUD/JPY slips towards in Tuesday’s Asian trading. Following the Reserve Bank of Australia (RBA) rate decision, the Australian Dollar (AUD) faces some selling against the Japanese Yen (JPY).

At the close of its November monetary policy meeting, the RBA lifted the Official Cash Rate (OCR) from 4.60% to 4.85%, a widely anticipated increase of 25 basis points (bps). The move marks its fifth rate rise of 2026 and takes the rate to its highest level in 18 years.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Six members of the Monetary Policy Board supported the increase; three favoured leaving the OCR at 4.60%. In its statement, the board described inflation as elevated and broadly based. It also warned of a growing risk that higher inflation expectations would become entrenched.

Attention now turns to RBA Governor Michele Bullock’s press conference at 04:30 GMT for further signals. Hawkish remarks from Bullock could provide near-term support for the Aussie against the JPY.

The cross’s gains could nevertheless be constrained by Japanese warnings over intervention. Speaking on Monday, Japan’s Finance Minister Satsuki Katayama stressed the importance of stable foreign exchange markets and the government’s need to prevent chaotic fluctuations.

Katayama said last week that the government was prepared to act decisively in the currency market. Her comments signalled that Tokyo remained vigilant over persistent JPY weakness.

At its latest policy meeting last week, the Bank of Japan (BoJ) held the short-term interest rate at 1.25%, matching market expectations.

4.85% RBA rate expected as inflation surprise strengthens Aussie yield appeal

Tuesday’s "RBA policy decision and Statement on Monetary Policy" is expected to bring a "second straight 25bps hike to 4.85% because inflation is materially worse than the bank assessed in August.", according to strategists at Brown Brothers Harriman. Their assessment is that "cash rate futures imply 83% probability of a hike," while "hawkish guidance would widen AUD’s yield advantage,". Such guidance would underpin the Australian Dollar as the RBA’s policy stance diverges from those of its peers.

100-day SMA caps AUD/JPY: Technical Analysis remains bearish

Trading below both the Bollinger middle band and the 100-day simple moving average (SMA), AUD/JPY maintains a bearish near-term outlook on the daily chart. The Bollinger upper band also limits the pair, adding to the negative tone. At around 45, the Relative Strength Index (14) points to weak momentum rather than oversold conditions, allowing scope for further declines.

For a recovery, the first resistance is the Bollinger middle band at 110.45. The upper band near 111.40 follows, ahead of a more distant obstacle at the 100-day SMA of 111.90. Below current levels, the next notable support sits around 109.50 at the Bollinger lower band, where selling could pause. A sustained breach of that floor would likely clear the path to lower levels on the daily timeframe.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

RBA: Key questions

Reserve Bank of Australia: What is its role in the Australian Dollar?

Responsibility for Australia’s interest rates and monetary policy rests with the Reserve Bank of Australia (RBA). A board of governors makes decisions at 11 scheduled meetings each year, supplemented by emergency meetings when needed. Maintaining price stability, defined as inflation of 2-3%, is the RBA’s primary mandate. It also seeks “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Changes to interest rates are its principal policy tool: relatively high rates strengthen the Australian Dollar (AUD), while relatively low rates have the opposite effect. Quantitative easing and tightening are also part of its toolkit.

Inflation data: What does it mean for the Australian Dollar?

Traditionally, inflation was viewed as harmful to currencies because it erodes the value of money. With cross-border capital controls relaxed in modern times, however, the relationship has reversed. A moderate rise in inflation now tends to prompt central banks to increase interest rates. Higher rates, in turn, draw capital from global investors looking for attractive returns. Those inflows lift demand for the domestic currency, which in Australia’s case is the Aussie Dollar.

Economic indicators: How do they affect the Australian Dollar?

By measuring an economy’s health, macroeconomic releases can influence its currency’s value. Investors favour stable, expanding economies over fragile, contracting ones. Larger capital inflows raise overall demand for the domestic currency and lift its value. Indicators that can move AUD include GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys. Economic strength may also prompt the Reserve Bank of Australia to increase interest rates, providing further support for AUD.

Quantitative Easing (QE): How does it work and affect the Australian Dollar?

When interest rate cuts alone cannot restart credit flows, Quantitative Easing (QE) offers a policy tool for extreme circumstances. Under QE, the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) to purchase assets from financial institutions, usually government or corporate bonds. These purchases supply the institutions with much-needed liquidity. A weaker AUD is the usual outcome.

Quantitative tightening (QT): What does it mean for the Australian Dollar?

Once an economic recovery is under way after QE and inflation begins to rise, quantitative tightening (QT) reverses the easing process. QE involves the Reserve Bank of Australia (RBA) buying government and corporate bonds from financial institutions to supply liquidity. With QT, the RBA instead halts further asset purchases and no longer reinvests principal from maturing bonds in its portfolio. This would support the Australian Dollar, a positive or bullish effect.